EMERGING MARKETS



Abstract: Focuses on the United States government\'s policy on the Big Emerging Markets (BEM), which include the Chinese Economic Area, South Korea, Indonesia, India, South Africa, Poland, Turkey, Mexico, Brazil and Argentina. BEMs\' investment on infrastructure projects; BEM\'s share of global gross domestic product; Projected increases in world imports; Lessons learned from the BEM strategy.

THE BIG EMERGING MARKETS

During his tenure as Under Secretary of Commerce, the author was one of the architects of the Clinton administration\'s Big Emerging Markets policy under Secretary of Commerce Ron Brown. He is now
dean of the Yale School of Management. The Clinton policy emerged out of a growing conviction that some ten markets will account for the overwhelming growth potential in world imports, not to mention commensurate growth in economic and political influence around the world. These markets include, in Asian--the Chinese Economic Area (China, Hong Kong and Taiwan), South Korea, Indonesia and India; in Africa--South Africa; in Central Europe--Poland and Turkey; and in Latin America Mexico,Brazil and Argentina. The administration concluded that, because many of these countries still have important state sectors, and because virtually all are focusing heavily on infrastructure projects that demand the involvement of local governments, U.S. companies need the U.S. government at their side to win a fair hearing. What is more, because of the intensity of foreign competition and the capital demands on these countries, international competitors will be public/private partnerships in which foreign governments provide concessionary financing and aggressive advocacy to support their companies\' efforts.

Discovering the BEMs

During the first year of the Clinton administration, a good deal of analysis was conducted to answer the questions, "If we look toward the next century, where will we find the engines of American growth? What
markets hold the most promise? What is the role of the U.S. government in helping to ensure that we realize that promise?" Although such questions seem rational enough, as far as Washington has been concerned in past years, they have rarely been pursued in the international economic arena, let alone answered. Nevertheless, the Clinton administration broke with past patterns. It put an enormous amount of effort into looking over the immediate horizon and came up with some interesting--and powerful--conclusions.

We found, for example, that the markets in Europe and Japan will be growing much more slowly over the next two decades than a good deal of the rest of the world. Moreover, we discovered that, despite optimism
about future prospects throughout East Asia and Latin America, the countries that will account for the overwhelming incremental growth in the world imports number fewer than a dozen, which we called the Big
Emerging Markets, or BEMs. The BEMs are in Asia--the Chinese Economic Area (China, Hong Kong and Taiwan), South Korea, Indonesia and India; in Africa--South Africa; in Central Europe--Poland and Turkey; and in Latin America--Mexico, Brazil and Argentina (see Chart 1).

We also found that success in these markets will require a complete rethinking of our approach to trade. Because these are emerging markets, they are constantly changing and occasionally unstable. They do not have the established ties to the United States that our traditional partners have had. Relations with them are volatile. And, because of the enormous promise of these markets, they are a magnet for the world\'s most competitive companies from the U.S. and abroad.

In each, competition will be fierce. But because many have important state sectors, and because virtually all are focusing heavily on infrastructure projects that demand the involvement of local governments, U.S. companies will need the U.S. government at their side to win a fair hearing. What is more, because of the intensity of foreign competition and the capital demands on these countries, our competitors will be public/private partnerships in which foreign governments are providing concessionary financing and aggressive
advocacy to support their companies\' efforts. If we don\'t do the same, we will lose not only our chance to succeed in these markets but our chance to remain the world\'s economic leader into the next century.




BEMs in the Headlines
..... Turkey has been the crossroads of the world since Alexander. In recent years, an economic renaissance made the Istanbul stock market one of the most attractive in the world. Now, Turkey has